"US Concerns Over Excessive Post-Pandemic Stimulus... Increased Instability"

American Economic Association 2024 Annual Meeting
"Rapid Tightening Policies Cause Financial Instability"

There is growing attention to the diagnosis that excessive stimulus measures after the pandemic have increased instability in the global economy, including the United States.

On the 5th (local time) at the annual meeting of the American Economic Association (AEA) held in San Antonio, Texas, global economists shared these concerns. The AEA is the largest event in the field of economics, where leading scholars from around the world gather every early January to present and discuss papers in economics.

Harvard University professor Robert Barro criticized in his paper session presentation titled "Inflation, Financial Crisis, and Recession" that despite inflation slowing down, "the U.S. Federal Reserve (Fed) continues its interest rate hike path to the extent that it can be said to be unwise."

Professor Barro evaluated, "In recent years, the U.S. economy has been affected by the recession and recovery triggered by COVID-19, the massive increase in fiscal spending in response to the recession, the resulting rapid rise in prices, and the increase in interest rates."

Professor Barro believes that the massive fiscal spending by countries in response to the sharp economic downturn after the pandemic was the cause of the rapid inflation observed since 2020. He also expressed concern that the central banks' rapid tightening policies in response to inflation could trigger financial instability. Referring to the Fed's continued tightening policy, Barro predicted, "Taken together, this picture suggests a recession in 2024," adding, "If the financial crisis does not worsen, the recession will be mild."

Janice Eberly, a Northwestern University professor who was also mentioned as a candidate for Fed Vice Chair, diagnosed that the pandemic left overall instability in the economy.

In her paper titled "Recovery and Risky Growth," Professor Eberly said, "Along with new challenges related to climate, conflict, and governance, overall instability was engendered during the pandemic period," adding, "This instability makes it difficult to predict future paths and reduces resilience to systemic shocks."

Kenneth Rogoff, Harvard University professor and former chief economist of the International Monetary Fund (IMF), evaluated in his paper "The World Economy at a Turning Point" that "excessive stimulus measures after the pandemic, the Ukraine war, and China's slowing growth rate have combined to deliver a major shock to the balance of the global macroeconomy." He mentioned the possibility that the average long-term real interest rate will remain at a high level over the next decade, emphasizing, "If this happens, it will have significant impacts on financial stability and debt sustainability."

This content was produced with the assistance of AI translation services.